Coinbase’s relationship with governments and law enforcement agencies has been a significant cause for concern among the company’s customers. Recently, the firm provided some disclosure on how much of its customers’ details the government had shown an interest in.
Friend of the Feds
The Silicon Valley exchange published its first “Transparency Report,” showing the extent to which it had cooperated with governments and law enforcement agencies concerning turning over clients’ information. As the report confirmed, law enforcement agencies sent 1,914 requests to the exchange within the first half of the year, with 97 percent of them related to criminal investigations.
The report showed that U.S. agencies accounted for the largest number of requests, sending 1,113 of the total requests. About 441 came from authorities in the United Kingdom, while 176 came from Germany. The rest were from regulators scattered worldwide.
When it came to law enforcement agencies, Coinbase noted that the majority of information requests came from the Federal Bureau of Investigation (FBI). The investigative body requested data 340 times, while the Department of Homeland Security Investigations made 184 requests. Local state agencies made 180 requests, while the Drug Enforcement Administration (DEA) came in fourth place with 104 requests.
Other agencies that featured on the list include the Securities and Exchange Commission (SEC), the Justice Department, the Secret Service, and more.
It’s worth noting that Coinbase didn’t specify how many of such requests it had granted. However, there’s a significant chance that the exchange co-operated with most of them. Paul Grewal, the exchange’s Chief Legal Officer, explained that most requests came in the form of subpoenas, search warrants, and court orders. Given the weight of these legal processes, it’s difficult to see the company not yielding.
“We respect the legitimate interests of government authorities in pursuing bad actors who abuse others and our platform. Yet, we will not hesitate to push back where appropriate,” Grewal pointed out.
The Two Sides of the Regulatory-Friendly Coin
The relationship with governments is in line with Coinbase’s objective of becoming more regulatory-compliant. The company has understood the importance of milking relationships with law enforcement, and it has benefitted significantly from this approach.
Earlier this year, Coinbase announced in a report that its user base had topped 35 million. The growth is due in large part to its Coinbase Pro platform, which operates in just about every American state – even the ones with tough regulatory landscapes like New York.
However, the exchange’s regulator-friendly approach has also drawn significant pushback. In June, a report from The Block confirmed that Coinbase had been in talks with the DEA and the Internal Revenue Service (IRS) overselling them licenses for Coinbase Analytics, one of the exchange’s top web tools.
Customers immediately balked at this, with a Twitter poll from Bitcoin trader and commentator Josh Rager showing that about 47 percent of them would leave the platform if the deal closed.
Defending himself, Coinbase CEO Brian Armstrong explained on Twitter that the company embarked on the move to stay compliant with regulations and improve fiat-crypto relations.
“If people want true privacy, that is what privacy coins are for. I’m a fan of privacy coins because I think everyone should have more financial privacy. It will be similar to how the internet moved from HTTP to HTTPS over time,” Armstrong said.
He added that the move was also business-oriented, as Coinbase needed to recoup some of the costs they incurred building Coinbase Analytics.